Shares of Amber Enterprises India Ltd extended losses in early trade today, May 19 as Goldman Sachs maintained 'Neutral' coverage highlighting tough macro environment coinciding with aggressive capital expenditure and little room for any negative surprises on execution timelines of new verticals. After falling 7% in the previous session, shares of Amber Enterprises opened at Rs 71,58 apiece on the NSE and slid 2% to trade 1.64% lower at Rs 7,034 apiece on the NSE.
The global brokerage firm, its recent note has cut target price from Rs 7,360 to Rs 6,800, nearly 5% downside from its current price (Rs 7,153.5). Amber Enterprises reported a top-line growth of 10% on an year on year basis driven by 21% growth in Electronics and 22% growth in Railway sub-systems.
Consumer durables grew at 6% following a strong third quarter which had grown due to channel filling. EBITDA margin beat at 8.6% driven by Electronics. The company recorded an exceptional gain of Rs 64 crore during the quarter.
Goldman Sachs highlighted that Amber's commentary was cautious, noting that lowering growth and profitability outlook amid a challenging macro environment is concerning, while expecting the company to incur a capex of nearly 77% of sales in the next 2 years.
Working capital needs, which currently remains elevated, should also be closely watched due to the company's reliance on operating cash flows to partially fund its capex. While new growth initiativesundertaken by Amber is expected perform well in the medium to long-term, the brokerage thinks there is little room for any negative surprises on execution timelines of new verticals and overall profitability improvement. Goldman says, "risk-reward is well-balanced."
Amber Shares Tumble Over 17%
During Monday's trading session, Amber Enterprises shares were under tremendous pressure after the company said higher minimum wages in north India, rising prices of copper-clad laminate and gold, and currency movements are increasing cost pressure across divisions. The stock fell as much as 17.65% intraday, trading at around 6,980 apiece.
The company expects margin pressure of 50 basis points to 100 basis points in FY27 as higher wages, rising raw material costs and currency depreciation weigh on its consumer durables and electronics businesses despite a recovery in room air-conditioner demand.
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